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German Property Price Growth Continues

Price growth in the German property market continues to be strong, boosted by strong demand from both German and overseas property investors.

The price of apartments in the German property market showed particularly strong growth in the third quarter of 2019. Apartment prices grew by 9.46 per cent on an annual basis, compared to 5.15 per cent the previous year.

The German property price increase marked the strongest growth for over three years, since the second quarter of 2016. On a quarterly basis, German property prices increased 3.34 per cent during the latest quarter.

Demand for German property remains strong, buoyed by low interest rates, urbanisation, and healthy household finances. Recently, the migration crisis and strong economic growth have added to the already strong demand in the country.

Despite this, construction activity remains weak. In the first eight months of 2019, dwelling permits fell by 2.5 per cent to 228,500 units compared to the same period last year, according to the Federal Statistical Office (Destatis).

Average rental yields for German property remained moderate at approximately 2.9 per cent to 3.7 per cent.

Of the major cities, Frankfurt offered the best rental yield of 3.7 per cent, with an average city centre apartment purchase price of € 544,680 and average monthly rent of € 1,678.

Berlin offered an average yield of 2.99 per cent, with an average city centre apartment purchase price of € 598,920 and average monthly rent of € 1,493.

Munich suffered slightly from a particularly high average purchase price of € 942,360 to receive monthly rent of € 2,243 and generate yield of 2986 per cent.

However, despite the strength of the German property market, Germany’s economy registered lacklustre growth in 2018, with real GDP growth of just 1.4 per cent, down from 2.2 per cent in 2017 and the weakest expansion in five years, according to Destatis.

Europe’s largest economy continues to struggle this year, with GDP rising by a meagre 0.7 per cent in Q1, 0.4% in Q2 and 0.5 per cent in Q3. In a quarterly basis, the economy barely grew by 0.1 per cent in Q3 2019, narrowly avoiding a technical recession following a 0.2 per cent contraction in the previous quarter.

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